Template:Nutshell 1992 ISDA 6(e)

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6. Early Termination

6(a) Right to Terminate following Event of Default. If one party (“Defaulting Party”) suffers an Event of Default, the other (the “Non-defaulting Party”) may, by not more than 20 days’ notice, designate an Early Termination Date for all outstanding Transactions. If Automatic Early Termination applies to the Defaulting Party and the Event of Default it is qualifying Bankruptcy event, the Early Termination Date will occur:

(i) upon the Bankruptcy event, if under 5(a)(vii)(1), (3), (5) or (6) or if analogous, (8); and
(ii) immediately before institution of the relevant proceeding, if under 5(a)(vii)(4) or if analogous, (8).


6(b) Right to Terminate Following Termination Event.

6(b)(i) Notice. Upon becoming aware of a Termination Event the Affected Party will promptly give the other party with reasonable details of it and each Affected Transaction (or, if it is a Force Majeure Event, make reasonable efforts to do so).
6(b)(ii) Transfer to Avoid Termination Event
If there is a Tax Event with only one Affected Party or a Tax Event Upon Merger where the Burdened Party is the Affected Party, before designating an Early Termination Date the Affected Party must use all reasonable efforts to transfer, within 20 days of giving notice of the Termination Event, all its rights and obligations under the Affected Transactions to one of its Offices or Affiliates so that the Termination Event ceases to exist.
If it cannot make such a transfer, it will advise the other party within the 20 day period, and the other party may effect such a transfer within 30 days after the original notice of Termination Event.
Any such transfer by a party under this Section will require the of the other party’s prior written consent (which may not be withheld if the other party’s prevailing policies would permit it to enter into transactions on the terms proposed).
6(b)(iii) Two Affected Parties. If there is a Tax Event with two Affected Parties, each must use all reasonable efforts agree within 30 days after the Termination Event Notice to avoid it.
6(b)(iv) Right to Terminate
(1) Termination Events other than Illegality and Force Majeure Events: If the Termination Event still exists but:―
(A) Tax Termination Events: a neither party has managed to avoid a Tax Event or Tax Event Upon Merger as contemplated in Section 6(b)(ii) or 6(b)(iii) within 30 days of a Termination Event Notice; or
(B) Other Termination Events: there is a Credit Event Upon Merger, an Additional Termination Event or a Tax Event Upon Merger where the Burdened Party is not the Affected Party:
either party (if both are Affected Parties) or the Non-Affected Party (in any other case) may, on not more than 20 days’ notice, designate an Early Termination Date for all Affected Transactions.
(2) Illegality and Force Majeure Events: If an Illegality or Force Majeure Event still exists when its Waiting Period has expired:―
(A) Subject to clause (B) below, either party may, on not more than 20 days’ notice, designate an Early Termination Date:
(I) for all Affected Transactions, or
(II) for fewer than all Affected Transactions by specifying which Affected Transactions it wishes to terminate, effective no earlier than two Local Business Days following the effective day of its notice, as an Early Termination Date for those designated Affected Transactions only. In this case the other party may, by notice, terminate any of the outstanding Affected Transactions as of the same Early Termination Date.
(B) Where the Illegality or Force Majeure Event relates to performance under a Credit Support Document, an Affected Party may only designate an Early Termination Date following designation by the other party of an Early Termination Date, for fewer than all Affected Transactions under this Section.

6(c) Effect of Designation: If an Early Termination Date is designated:

(i) it will take place when designated, even if the event which triggered no longer exists.
(ii) no more payments or deliveries will be required under any Terminated Transactions.

Any Close-out Amount will be determined under Section 6(e).
6(d) Calculations; Payment Date.

(i) Statement. As soon as practicable following an Early Termination Date, each party will calculate its Section 6(e) amount and give the other party a statement:
(1) showing reasonable detail of its calculations;
(2) specifying any Early Termination Amount payable; and
(3) giving its bank details for payment of the Early Termination Amount.
Its records of any quotation or market data it uses will be conclusive of their accuracy.
(ii) Payment Date. An Early Termination Amount due in respect of any Early Termination Date will, together with any applicable interest, be payable
(1) on the day its Section 6(d) statement is effective (if the Early Termination Date follows an Event of Default) and
(2) two Local Business Days after the day its Section 6(d) statement is effective (or, where there were two Affected Parties, after the second statement is effective) (where the Early Termination Date follows a Termination Event.

6(e) Payments on Early Termination. If an Early Termination Date occurs, the “Early Termination Amount” will be determined as follows (subject to Section 6(f)).

6(e)(i) Events of Default. On an Early Termination Date following an Event of Default, the Non-defaulting Party will determine Early Termination Amount in the Termination Currency as the sum of:
(a) the Close-out Amounts for each Terminated Transaction plus
(b) Unpaid Amounts due to the Non-defaulting Party; minus
(c) Unpaid Amounts due to the Defaulting Party.
If the Early Termination Amount is positive, the Defaulting Party will pay it to the Non-defaulting Party. If negative, the Non-defaulting Party will pay its absolute value to the Defaulting Party.
6(e)(ii) Termination Events. If the Early Termination Date results from a Termination Event:―
(1) One Affected Party. If there is one Affected Party, the Early Termination Amount will be determined as if they were Events of Default under Section 6(e)(i) (but subject to the Mid-Market Events rider below).
(2) Two Affected Parties. If there are two Affected Parties, each party will determine the Termination Currency Equivalent of the Close-out Amounts for all Terminated Transaction and the Early Termination Amount will be:
(A) the sum of
(I) half of the difference between the higher amount (determined by party “X”) and the lower amount (determined by party “Y”) and
(II) the Termination Currency Equivalent of the Unpaid Amounts owing to X minus
(B) the Termination Currency Equivalent of the Unpaid Amounts owing to Y.
If the Early Termination Amount is a positive number, Y will pay it to X; if negative , X will pay its absolute value to Y.
(3) Mid-Market Events. In either case where the Termination Event is an Illegality or a Force Majeure Event, when determining a Close-out Amount the Determining Party will use mid-market valuations that do not take the Determining Party’s own creditworthiness into account.
6(e)(iii) Adjustment for Bankruptcy. If an “Automatic Early Termination” happens, one can adjust the Early Termination Amount to reflect payments or deliveries actually made between the automatic Early Termination Date and the payment date determined under Section 6(d)(ii).
6(e)(iv) Adjustment for Illegality or Force Majeure Event. The failure by a party or its Credit Support Provider to pay an Early Termination Amount when due will not be a Failure to Pay or Deliver or a Credit Support Default if caused by an Illegality or a Force Majeure Event. The unpaid amount will:
(1) be treated as an Unpaid Amount for a subsequent Early Termination Date resulting from an Event of Default, a Credit Event Upon Merger or an Additional Termination Event affecting all outstanding Transactions; and
(2) otherwise accrue interest in accordance with Section 9(h)(ii)(2).
6(e)(v) Pre-Estimate. The parties acknowledge that:
(a) Each Early Termination Amount is a reasonable pre-estimate of loss and not a penalty; and
(b) neither party may recover any additional damages as a consequence of terminating Terminated Transactions.

6(f) An Innocent Party may, by notice, set-off any part of an Early Termination Amount payable by one party against any Other Amounts payable by the other under any other agreement, converting currencies if necessary and estimating unascertained obligations in good faith, but it must account for any difference between its estimate and the amount when it is finally ascertained.
6(e)(i) Events of Default. If the Early Termination Date follows an Event of Default: —

(1) If First Method and Market Quotation applies, the Defaulting Party must pay any positive excess of (A) the sum of Settlement Amount and the Termination Currency Equivalent of the Unpaid Amounts owing to the Non-defaulting Party over (B) the Termination Currency Equivalent of the Unpaid Amounts owing to the Defaulting Party.
(2) If First Method and Loss applies, the Defaulting Party must pay the Non-defaulting Party’s positive Loss (if it has suffered one).
(3) If Second Method and Market Quotation applies, the amount payable will be (A) the sum of the Settlement Amount for the Terminated Transactions and the Termination Currency Equivalent of the Unpaid Amounts owing to the Non-defaulting Party less (B) the Termination Currency Equivalent of the Unpaid Amounts owing to the Defaulting Party. If positive, the Defaulting Party will pay that amount to the Non-defaulting Party; if negative, the Non-defaulting Party will pay its absolute value to the Defaulting Party.
(4) If Second Method and Loss applies, the Non-defaulting Party’s Loss in respect of this Agreement will be payable. If it is positive number, the Defaulting Party will pay it to the Non-defaulting Party; if negative, the Non-defaulting Party will pay its absolute value to the Defaulting Party.

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